Unfair but balanced commentary on tax and budget policy, contemporary U.S. politics and culture, and whatever else happens to come up

Wednesday, March 24, 2010

The healthcare bill's mandate to buy health insurance

By now there's been clear coverage of the fact that requiring the purchase of health insurance coverage is historically a Republican idea. But leaving that ad hominem point aside, is there any reason actually to object to it?

The above article contains one important discussion point, from Mitt Romney before he became a laughing stock:

"'Some of my libertarian friends balk at what looks like an individual mandate,' Romney wrote in The Wall Street Journal in 2006. 'But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian.'

"Romney was referring to the federal law that requires everyone to be treated in emergency rooms, regardless of their ability to pay."

To sidestep Romney's argument, you pretty much need to demand that emergency rooms be permitted, and perhaps even strongly encouraged (to prevent penalizing compassion), to shut their doors to those who cannot pay for lifesaving services.

That's point 1. But there also is point 2, which admittedly would not appeal to a pure, slam-the-emergency-room doors, libertarian, but should be conclusive for anyone who supports any element whatsoever of redistribution (as from "ability to pay" taxation that is not rationalized purely on benefit grounds, or from supporting any kind of welfare system whatsoever).

As public economics types have understood for several decades, an income, consumption, or wage tax, especially if accompanied by any sort of welfare or public aid system, is best rationalized as mandatory earnings-ability insurance. Earn more and you pay more, do badly enough and perhaps you get something. Mandatory application of the insurance scheme is necessary to forestall adverse selection, which prevents markets from satisfying consumer demand for this particular insurance product. Grant the desirability of such a system - and rejecting it pretty much requires fetishizing markets even in the presence of clearly demonstrable market failure that otherwise would lead to frustrated consumer preferences - and the debate is over. Not about the healthcare bill itself, of course, but about the theoretical claim that there is anything wrong in principle with mandating the purchase of health insurance.

The only difference I can see between mandatory earnings-ability insurance and mandatory health insurance is that the latter is in kind, rather than in cash. But it pertains to a pretty universally demanded consumer good. This is not much like requiring people to buy cars that only some might want.

UPDATE: Another obvious analogy is to Social Security (mandatory retirement saving plus mandatory annuitization). Or for that matter Medicare, financed by mandatory payroll deductions, or unemployment insurance.

It's true that those are tied to deciding to work, whereas the health insurance mandate applies even if you stay home, but that makes no possible difference (why thus penalize working if it's otherwise illegitimate?), other than perhaps on some desperate stab at legal rather than normative analysis, emphasizing a pre-1930s view of the Commerce Clause.

8 comments:

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The article mentions two Republicans for the proposition than a mandate is a good idea - Mitt Romney and Tommy Thompson. Does this really cement this concept as a Republican idea so much as one some Republicans have supported in the past?

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About Me

I am the Wayne Perry Professor of Taxation at New York University Law School. My research mainly emphasizes tax policy, government transfers, budgetary measures, social insurance, and entitlements reform. My most recent books are (1) Decoding the U.S. Corporate Tax (2009) and (2) Taxes, Spending, and the U.S. Government's March Toward Bankruptcy (2006). My other books include Do Deficits Matter? (1997), When Rules Change: An Economic and Political Analysis of Transition Relief and Retroactivity (2000), Making Sense of Social Security Reform (2000), Who Should Pay for Medicare? (2004), Taxes, Spending, and the U.S. Government's March Towards Bankruptcy (2006), Decoding the U.S. Corporate Tax (2009), and Fixing the U.S. International Tax Rules (forthcoming). I am also the author of a novel, Getting It. I am married with two children (boys aged 24 and 21) as well as three cats. For my wife Pat's quilting blog, see Patwig’s Blog.